Crude oil is surging, but I’m not buying just yet

West Texas Intermediate crude oil broke above the $65 per barrel level on Wednesday on the heels of a surprise decrease in U.S. inventory, sending prices up to the highest level since early February.

While crude oil appears to be gathering momentum, I’m cautiously bullish on oil at this juncture. Here are some factors that would theoretically prop up prices.

Tensions have been escalating between Iran and Saudi Arabia as rhetoric over a nuclear arms race is creating anxiety between the two nations. We saw Crown Prince Mohammed bin Salman meet with President Donald Trump on Tuesday to further discuss the issue.

In addition, Venezuelan oil production has continued declining, to 1.548 million barrels per day, further lending support.

Venezuela has been under mounting pressure from creditors, causing most of its oil to be shipped off to pay its debts. Despite a small build in crude oil stocks in Cushing, Oklahoma, the Midwest’s main shipping hub, the Energy Information Administration reported a decline of 2.6 million barrels, snapping three straight weeks of gains.

Still, with all this bullish news, it’s hard to remember that the U.S. is continuing to pump crude oil at a record pace, starting the year off at 9.5 million barrels per day and more recently pumping over 10.3 million barrels per day as of early March.

One other wild card to watch is the U.S. dollar’s reaction to the Fed’s policy decisions down the road; remember, if and when the dollar gains strength against rival currencies, this may weigh on commodity prices. That may ultimately be the dagger that stops this rally in its tracks.